No Minister

Posts Tagged ‘Foreign Debt Defaults

Ideas out of the Past

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Over on Britain the Tory Prime Minister, Boris Johnson, has had yet another brilliant idea for dealing with the fundamental problem of real estate prices getting away from working people, preventing them from buying housing.

Putting on my Class Warfare hat I have to say that this idea is entirely appropriate for a Tory:

Wait a moment, I think I’ve heard of this idea before. From history…

Debt bondage, also known as debt slaverybonded labour, or peonage, is the pledge of a person’s services as security for the repayment for a debt or other obligation.

I can see Boris as a feudal lord: he’s picture perfect to play the Sheriff of Nottingham in some new version of Robin Hood.

Of course it’s not just Britain. Here’s a story from 2014 in the USA:

A few weeks ago, with no notice, the U.S. government intercepted Mary Grice’s tax refunds from both the IRS and the state of Maryland. Grice had no idea that Uncle Sam had seized her money until some days later, when she got a letter saying that her refund had gone to satisfy an old debt to the government—a very old debt.

When Grice was 4, back in 1960, her father died, leaving her mother with five children to raise. Until the kids turned 18, Sadie Grice got survivor benefits from Social Security to help feed and clothe them.

Now, Social Security claims it overpaid someone in the Grice family—it’s not sure who—in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter.

But there are many forms of intergenerational debt and the major one leaves Boris’s idea (and feudal practices) far behind. The following educational video was made a decade ago in the wake of the GFC, back when US Federal debt was a mere $14 trillion toddler, compared to the moody $30 trillion teenager it is now.

Written by Tom Hunter

July 6, 2022 at 11:04 am


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Last week and in what Standard & Poors described as a ‘selective default’ Russia attempted to pay in rubles two dollar-denominated bonds worth USD650m. According to S&P, a selective default is declared when an entity has defaulted on a specific obligation but not its entire debt. In this case Russia defaulted on its foreign debt obligations because it offered bondholders payments in rubles, not dollars.

Moscow has a grace period of 30 days from April 4 to make the payments of capital and interest, but S&P said it does not expect it will convert them into dollars given Western sanctions that undermine its willingness and technical abilities to honor the terms and conditions of its obligations.

A full foreign currency default would be Russia’s first in more than a century, when Bolshevik leader Vladimir Lenin repudiated bonds issued by the Tsarist government.

And in Sri Lanka the Finance Ministry said in a statement the country was defaulting on all external obligations including loans to foreign governments. Sri Lanka’s foreign debt is put at USD51b with China its largest bilateral lender followed by Japan and India

Of the two countries Sri Lanka’s default is by far the most serious although the reputational damage resulting from the Russian default should not be underestimated. Its economy is projected to contract 8.4% in 2022 reflecting sanctions and the cost of Putin’s war and remembering always that Russia is no economic power-house. Its GDP is only slightly more than that of Australia while its GDP per capita at $10,115 is five times smaller than that across the ditch at $52,905 (2020 figures).

And finally the loss of the Moskva, flagship of Russia’s Black Sea fleet, damaged in an explosion on Wednesday and now sunk with the Ukrainians claiming they took it out with a Neptune missile, a claim disputed by the Russians. Whatever the cause this will be a propaganda victory for the Ukrainians and more evidence of the lie by Putin that ‘his’ Special Military Operation is going to plan … some plan when you lose your flagship.

Written by The Veteran

April 15, 2022 at 3:19 pm